stocks vs. cds

bfallik · ‎12-08-2023

Given the relatively high CD interest rates, would it be a good idea to move money from stocks to CDs for at least a year? If so, is it best to do before or after the new year?

fffred · ‎12-09-2023

@bfallik I agree with @DirkB349973 that timing the market (stock/bond/cash/etc) is not wise. I suggest determining your desired "asset allocation" ...how much % you want to put into stock market, the bond market, and cash (CDs, high interest savings, etc)... based on your age, experience, and comfort level. Determine that and then arrange your assets to suit your desired allocation. Many people then re-adjust their accounts every year or so to rebalance to their desired allocation (which may be the same or may have changed) due to differing performance in each category (ie: the actual asset allocation diverges from the desired).

I myself am about 50% equities (stocks) - 50% fixed income (bonds) (all in mutual funds), plus about 2 years of cash in savings (on top of my Social Security, which I just started collecting). I was uncomfortable going to 60% fixed income (bond funds) about 2-3 years ago and let it gradually go back up to 50-50, at which I am happy. My decision was based on reading "expected returns" based on historical data. And remember that you shouldn't base investing decisions on a stock's or fund's past history, but from a statistics standpoint it is realistic to study the returns of past performance of various stock-bond allocations to gain an insight into a suitable personal allocation. So, based on studying this information (available online at many sources) I felt good with the 50-50 (a year before I retired I was about 90% equity-10% cash) and didn't feel that I needed to be too greedy and go for 60-40... In my case I would feel the pain of a large loss much more than the joy of having a similarly large gain.

But you should always keep an eye on your cash and have it work hard for you, as my dad used to say.

Good luck!